Size of government and FDI: an empirical analysis based on the panel data of 81 countries

Purpose – The purpose of this paper is research the relationship between size of government and FDI inflows of the host country, and provide a strategies. Design/methodology/approach – Adopting the fixed effect model of panel data, this paper uses related observations from 81 countries between 2002 and 2006 to analyze the impacts of government size (measured by score of government size) on FDI inflows. Findings – The results show that the enlargement of government size has a positive effect on FDI inflows, and the effect is much more significant in developing countries. Originality/value – There is no previous research concerning the impacts of size of government on FDI inflows. Through the investigation, the paper finds the relation between government size and FDI inflows and provides much valuable information.